Increasing personalisation in the design of health insurance products risks leaving some customers out in the cold, according to consultancy PwC.
The firm’s Insurance Banana Skins 2021 report highlights issues associated with increasing personalisation.
It cites the example of increasingly granular health insurance assessment – which was seen as an opportunity to provide customers with more relevant products, but also a risk, with some people excluded from insurance altogether.
Sharing the risk
The head actuary of a Danish life insurer told the report’s compliers: “The tendency to individualise everything worries me. The foundation of insurance is sharing the risk and covering each other, but the next generations don’t seem to understand that.”
A consultant in Australia added: “Increased access of individuals to their own risk factors such as through genetic data, will bring increasing risk to insurers for example in relation to anti-selection, complaints, privacy issues, etc.”
Commenting on the report’s findings, Andrew Wilkinson, director at Moneysworth Life Insurance, (pictured) told Health & Protection while increasing personalisation can lead to better terms for people without serious health conditions, the flip side was the rejection of many cases and more expensive premiums that people have to pay as a result of their condition.
“Overall the mainstream insurance industry do reward certain types of cases and penalise others. Its not just price it’s the whole process, systems, journey times and so on,” Wilkinson said.
Baseline cover level
Consequently, Wilkinson suggested that one possible solution could be to introduce a new baseline amount of cover that was available en masse on a pooled rate basis and at the same cost.
“This would ensure that there was something for everyone, or nearly everyone, and it would also mean the cost of premiums for this base level of cover would need to increase compared to standard rate premiums as they are now,” he said.
“Personally I think that such a change could provide a better platform for consumers as a whole. But I can imagine there would be opposition from some parts of the protection industry, who would say that they are being asked to pay more.
“I think underlying the personalisation of products in our industry is a battle between the interests of the individual and collective responsibility to share risk.
“It feels like in our industry for a long time now individualism has had the upper hand.”